Beneficiary flexi-access drawdown is how a dependant, nominee or successor keeps an inherited pension invested and takes income as they choose.
If you have inherited a pot, a Pension Wise appointment is free, impartial and backed by government, and MoneyHelper lists inheriting someone else's pension as a reason people under 50 can book (what Pension Wise is). Anyone weighing an inherited pot, or planning what to leave, can have it gone over by an FCA-authorised adviser for nothing; ask by filling in this page's quote form.
What beneficiary flexi-access drawdown means
When someone with a defined contribution pension dies, the person who inherits can often move some or all of the money into drawdown in their own name. The pot that results is a beneficiary's flexi-access drawdown fund. HMRC's Pensions Tax Manual uses "beneficiary's drawdown pension" as the collective name for drawdown pension paid to "either a dependant, nominee or successor", so dependants' drawdown, nominee drawdown and successor drawdown are the three forms that beneficiary drawdown takes.
Inside the fund the money stays invested and the beneficiary decides how much to take. HMRC says a beneficiary has no minimum or maximum for any tax year, and, subject to the scheme's rules, can take nothing, a regular series of payments, irregular payments or the whole fund as one payment. Because the money stays invested, its value can fall as well as rise, and a beneficiary may get back less than the pot was worth when the member died.
Two limits come first. Only a money purchase (defined contribution) pot can be paid this way: HMRC says a defined benefit arrangement cannot pay drawdown pension of any form, so a final salary scheme pays its own death benefits instead (how pension death benefits work). And a scheme is under no duty to offer it. HMRC records that pension schemes do not have to pay benefits to a beneficiary as drawdown pension and that many do not offer it, while MoneyHelper says a beneficiary's options depend on the scheme's death benefit rules.
Three routes in, and which money each can use
All three routes lead to the same sort of fund, but they differ in who qualifies and in which money can be moved into drawdown. Who counts as which is covered in the guide to nominees and beneficiaries; this table shows what each does with the pot.
| Route | Who | Money that goes into the fund | Type of drawdown |
|---|---|---|---|
| Dependant | A person who meets the tax definition of dependant after the member's death | Sums designated after the member's death | Flexi-access, or capped if it began before 6 April 2015 |
| Nominee | Someone chosen by the member or the scheme administrator who does not count as a dependant | Unused uncrystallised funds or unused drawdown funds | Flexi-access only |
| Successor | A person who inherits what a dependant, nominee or earlier successor left behind | Unused drawdown funds of the person who died | Flexi-access only |
HMRC defines the terms used in the last two rows. Broadly, "unused uncrystallised funds" are money the member had never drawn on or moved into drawdown, still uncrystallised when they died, and "unused drawdown funds" are money that was still sitting in the member's own drawdown fund. That is why a successor's fund can only begin once a dependant, nominee or earlier successor has died with money left in theirs, and why what happens when a beneficiary dies matters to the next generation.
A dependant who started drawdown before 6 April 2015 may still be in capped drawdown, which has a yearly limit; that older arrangement is explained in flexi-access versus capped drawdown.
How an inherited pot gets into drawdown
The beneficiary starts by designating money as available to provide drawdown pension. HMRC says a fund of this kind can be created only on or after 6 April 2015, and that an arrangement can only hold one drawdown fund, so a later designation under the same arrangement goes into the fund already there.
A request alone is not enough. HMRC says it is not sufficient for a dependant, nominee or successor to just inform the scheme that they are designating the sums or assets, because the scheme must be capable of paying income withdrawal. Beyond that, each scheme that offers beneficiary drawdown decides how it documents the process, and HMRC's own example is that a scheme might require all designated funds to be withdrawn in a single instalment. A provider's process can therefore be the difference between a pot that stays invested and one that is paid out at once.
Timing matters as well, because tax-free treatment can depend on how quickly the money is designated (see the tax section below). Providers differ on paperwork, so an FCA-authorised adviser is worth hearing from before you designate anything, and this page's form books that free call.
What you can take from a beneficiary flexi-access drawdown fund
HMRC lists two kinds of drawdown pension from the fund: income withdrawal, paid straight from the fund, and a short-term annuity. A short-term annuity is bought from an insurer with part of the fund and, in HMRC's words, "will pay the beneficiary a certain income each year for a fixed period of up to five years". A beneficiary can also use some or all of the fund to buy a beneficiary's annuity, and a dependant can use it to provide a dependant's scheme pension.
Taking income from the fund does not set off the money purchase annual allowance on the beneficiary's own pension saving, because payments from a beneficiary's flexi-access drawdown fund sit on HMRC's list of payments that leave it alone. The allowance and what does set it off are in the money purchase annual allowance guide, and the general mechanics of drawdown are in the pension drawdown guide.
HMRC sets no lower or upper age limit for the person receiving it.
Is beneficiary drawdown taxed? Before and after age 75
Age at death is the main test, and it is the age of the person who died, not of the beneficiary. For a dependant or nominee, HMRC says income withdrawal is taxable if it is paid in respect of a member who was aged 75 or older when they died. It is not taxable where the member had not reached 75 and, if the fund includes unused uncrystallised funds, the money was designated within the "relevant two-year period": two years from the earlier of the day the scheme administrator first knew of the death or could reasonably have been expected to know of it. Miss that window and the income is taxable even for a death before 75.
For a successor the test moves one step down the line. Successors' income withdrawal is taxable if it is paid in respect of a beneficiary who was aged 75 or older when they died, and not taxable if that beneficiary had not reached 75. Where the income is taxable, HMRC says it is taxed at the beneficiary's marginal rate for the tax year, with the payer deducting tax under PAYE. If you live in Scotland, Scottish Income Tax bands apply to pension income (GOV.UK's Scottish Income Tax rates).
| Who died | Dependant's or nominee's income withdrawal | Successor's income withdrawal |
|---|---|---|
| Member aged under 75 | Not taxable, if designated within the two-year period where it applies | Not taxable if the beneficiary they inherit from was under 75 at death |
| Member aged 75 or over | Taxable at marginal rate | Taxable at marginal rate if the beneficiary they inherit from was 75 or over at death |
Taking the inheritance as a lump sum death benefit instead of moving it into drawdown follows a different test. GOV.UK's table shows no tax on most such payments where the person who died was under 75, as long as they stay within that person's lump sum and death benefit allowance, which GOV.UK sets at up to £1,073,100 (possibly more where a protected allowance is held); where they were 75 or over, the provider takes Income Tax off first. Money taken from your own beneficiary's drawdown fund, even the whole fund in one payment, is drawdown pension in HMRC's terms, so it is taxed under the income rules above. How that allowance is measured is in the lump sum and death benefit allowance guide, and the wider picture in inherited pension tax.
Inheritance tax is a separate question that turns on the date of death. HMRC's policy paper says the measure will bring most unused pension funds and pension death benefits within the value of a person's estate for Inheritance Tax purposes from 6 April 2027, and section 71 of the Finance Act 2026 applies the amendments to deaths on or after that date. See pensions and inheritance tax, and workplace pension death benefits for employer schemes.
Moving the fund or passing it on
A beneficiary may transfer their drawdown to another registered pension scheme, but HMRC says the transfer is an unauthorised payment unless it goes into a new, empty arrangement and the benefits are provided on a like-for-like basis, so income withdrawal must stay income withdrawal. MoneyHelper makes a related point to people planning ahead: if your provider does not allow the option that works best for your beneficiaries, you could consider moving the money to a different provider. The FCA warns that pension scams often involve attractive offers aimed at persuading people to transfer their pot, so check a firm on the FCA register first (FCA pension scams page).
The fund can also pass on. On GOV.UK's account, a beneficiary can name their own nominee for whatever is left unspent, but only money still held in a flexi-access drawdown fund at the date of death passes that way. Whether a particular scheme records that choice, and on what form, is written into its own rules, so ask the provider; an adviser can explain how it works if you ask for a call-back, at no charge. See also filling in an expression of wish.
Points that catch beneficiaries out
Is nominee drawdown the same as beneficiary drawdown?
Nominee drawdown is one kind of beneficiary drawdown. The other two are dependants' drawdown and successors' drawdown, and all three use the same type of flexi-access fund.
Can I take the whole inherited pot in one go?
HMRC says the whole fund as a single payment is one of the choices, subject to the scheme's rules. Whether the amount is taxed depends on the age at death and the timing described above.
Do I have to use drawdown?
No. MoneyHelper says beneficiaries can usually choose to take the pension as a lump sum or buy an annuity, and might also be able to use drawdown, depending on the scheme's death benefit rules.
Does my own age change the tax?
No. The age that counts is that of the person who died (or, for a successor, of the beneficiary they inherit from). Your age does not enter into it.
Dates to settle before you designate
The date of the death, the age of the person who died and the scheme's own paperwork all change the answer, and the two-year window runs from the day the scheme learns of a death. Questions about a real inheritance are best put to a person. Complete the quote form on this page to arrange a no-charge chat with an FCA-authorised adviser.